At April 30, partners\' capital balances in SKG Company are: S. Seger $45,800, J

Question

At April 30, partners' capital balances in SKG Company are: S. Seger $45,800, J. Kensington $57,300, and T. Gomez $21,600. The income sharing ratios are 5:4:1, respectively. On May 1, the SKGA Company is formed by admitting D. Atchley to the firm as a partner.

Kensington's capital balance is $33,860 after admitting Atchley to the partnership by investment. If Kensington's ownership interest is 20% of total partnership capital, what were (1) Atchley's cash investment and (2) the bonus to the new partner?

Explanation / Answer

Total Paernership capital of SKG = 45800+57300+21600 = $124,700 Now K's Partneship cpaital is 20% of Total capital ie 20% of New Capital = 33860 SO New capital = 33860/20% = $169,300 So A's capital = New capital - Old capital = $169,300 - $124,700 = $44,600 ..Ans (1) New Caital Bal of K is 33860. So an amount of 57300 - 33860 = $23,440 is K's cont to Bonus paid to A. Recall that old partners are reqd to share the Bonus to A in their P&L sharing ratio. So K's share is 40% (Ratio is 5:4:1). So 40% of Bonus = 23440 So Bonus to A = $58,600 ..Ans (2)

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